Jenny operates a small trading business.
On 29 February 2024, Jenny received a bank statement showing a credit balance of $1367. In her cash book, the bank column on the same date showed an overdraft of $1933.
When she compared the two records, she found the following items on the bank statement but not in her cash book:
February 26 M Stores, a credit customer, paid by bank transfer $1900
February 26 Interest received $358
February 27 A cheque that had already been received from C Stores was dishonoured $1121
February 28 Bank charges $125
February 28 A direct debit for electricity was taken $290
The following items were in her cash book but not on her bank statement:
February 23 A cheque paid to B Properties $1025
February 27 A payment by credit transfer to cover rent and insurance $2300
February 28 A cheque received from a credit customer Y Traders was paid into the bank $792
During her checking, she identified the following error:
A cheque payable to D Sports $45 had been entered in the bank column of her cash book. That cheque had actually been written from her personal account to pay for her gym membership.
(a)[7]
Update the bank column in Jenny’s cash book, balance it, and carry the figure down on 1 March 2024.
(b)[5]
Prepare a bank reconciliation statement at 29 February 2024. Start from Jenny’s bank statement balance.
(c)[2]
Suggest two benefits of preparing a bank reconciliation statement.
(d)[1]
Explain why a bank overdraft is recorded as a debit balance on a bank statement.
(e)[5]
Advise Jenny whether she should inject extra capital to clear her bank overdraft. Justify your answer.
Worked solution & mark scheme
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